Buying a Home: Pay with Cash or Use a Mortgage?

stacks of coins and paper bills

Not all prospective homeowners are lucky to have enough cash to buy a house using cash. For those fortunate enough to have that option, however, they would need to decide if they should buy a house upfront get a loan.

To help you decide, a recognized loan officer Johnson City explains the advantages of both options:

Buying a House with Cash

There are certain benefits to buying a house with your hard-earned cash. These include the following:

  • Complete homeownership
  • The opportunity to use the property as security for obtaining loans
  • Better buying power
  • No mortgage interest and all other mortgage-related costs

Buying a House with a Mortgage

Even if you have the means to buy a house using cold cash, you should still consider the advantages of buying a house with a mortgage. Depending on your financial health and plans for the future, a mortgage might actually be the best option in the long run, and here’s why:

  • Reduced mortgage rate, depending on the loan type and term
  • All the tax breaks that come with having a mortgage
  • Having “good” credit in your financial record, considering you pay your monthly payments on time
  • Exclusion from capital gains tax
  • The chance to build up and use home equity

Getting the Best of Both Worlds

If you’re not entirely well-versed with taking out a mortgage, but you still want to use cash to buy a house, you could just use both. You could put down at least 20% down payment or more, so you could spend your money and finance the remaining amount. Doing so would give you the best interest rate possible, eliminate private mortgage insurance, and give you an equity investment.

In addition, you could always pay off your home loan earlier than expected if you get a mortgage without prepayment penalties. And if you’re looking to retire in the next 10 years or so, you could prepay your home loan until you have a fixed income source, or consider getting a 15-year fixed rate mortgage.

Keep in mind that this decision doesn’t necessarily have to lead to an “either/or” outcome. You’re free to make changes as dictated by your financial health in the future. Just be sure to consider all the potential advantages of both options before making a decision.